HARJINDER SINGH GILL,KOLKATA vs. ITO, WARD-40(3)/ KOLKATA, KOLKATA

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 28.06.2023 for the AY 2013-14. 02. At the time of hearing of the assessee pressed ground no.2, which is extracted below:-
“2. That on the facts and circumstances of the case addition of ₹1,46,41,326/- is bad in law as original development agreement had become infructuous and a fresh agreement was entered into between the parties on 29.08.2017.”
03. The facts in brief are that the assessee filed the return of income on 26.09.2013, which was processed u/s 143(1) of the Act on 07.01.2014, declaring income of ₹5,00,950/-. The case of the assessee was reopened u/s 147 of the Act by issuing notice u/a 148
Harjinder Singh Gill; A.Y. 2013-14

on 31.03.2017. The assessee filed the return of income on 17.08.2017, in compliance and thereafter the assessee was supplied the reasons recorded the reopening of assessment. The ld. AO noted that Shri Harjinder Singh Gill has executed a joint development agreement with M/s Monark Dealcom Pvt. ltd. on 25.06.2012, in respect of landed property located at premises no.125A, Motilal Nehru
Road, Kolkata. The ld. AO also noted that the two persons were in ownership of 50-50 share. Thereafter, the ld. AO computed the long- term capital gain at ₹ 1,46,41,326/- as share of the assessee by treating the same as sale of property by the assessee and accordingly, show cause notice was issued which was replied by the assessee. In the said reply the assessee submitted that the land was given to M/s
Monark Dealcom Pvt. ltd. for joint development and no money was ever received. It was further stated that the said development agreement was never executed and carried through and on 29.08.2017 assessee entered into fresh agreement with the same party , wherein the assessee agreed to sell his share in the land for an agreed consideration and tax was also paid on the capital gain in the assessment year 2018-19. However, the reply of the assessee did not find in favour and the ld. AO added the long-term capital gain to the income of the assessee in the assessment framed u/s 143(3)/ 147
dated 22.12.2017. 04. In the appellate proceedings , the ld CIT(A) dismissed the appeal of the assessee when the assessee failed to file any reply / submission to various opportunities allowed by the ld. Commissioner of Income-tax
(Appeals). The ld. Counsel of the assessee at the outset, submitted that the case is squarely covered by the order passed by the ld. AO in the case of Guramrit Singh Gill, wherein the case of the assessee was reopened u/s 147 of the Act for the same reason and the ld. AO
Harjinder Singh Gill; A.Y. 2013-14

accepted the contention of the assessee that the joint development agreement was not executed and the vendor did not receive the consideration and therefore, the capital gain u/s 50C of the Act did not arise. In the said order, it was also stated that the land was sold to the builder in F.Y. 2017-18 relevant to A.Y. 2018-19 and the capital gain would be offered in that assessment year and therefore, the the question of capital gain does not arise.
05. The ld. DR on the other hand stated that the fact of non execution of joint development agreement was never before the AO and accordingly was not verified by the ld. AO. The ld. DR submitted that in all fairness the appeal may be restored to the AO for the same very reasons.
06. After hearing the rival contentions and perusing the materials available on record, we find that though the joint development agreement was entered into by the assessee with M/s Monark
Dealcom Pvt. Ltd. in respect of landed property located at premises no.125A, Motilal Nehru Road, Kolkata of which he was 50% owner and remaining 50% belonged to Guramrit Singh Gill. We note that no money was ever received under this agreement and this was never performed or executed. We also note that the said land was sold by both the co-owners .i.e assessee as well as his brother Shri Guramrit
Singh Gill on 28.08.2017 for the agreed consideration and the capital gain arose in the assessment year 2018-19 and would be paid accordingly. We observed that in the case of another co-owners Shi
Guramrit Singh Gill, the same plea has been accepted by the ld. AO in the reassessment proceedings for the same assessment year 2013-14
and no addition was made. The relevant paras are extracted below:-
Harjinder Singh Gill; A.Y. 2013-14

“From the submissions made before the AO, it came to light that the proposed project could not be started as planned as he property was tenanted leading the assessee and his father to decide upon on selling their proportionate right to the property to the developer M/s MONARK DEALCOM RVT. LTD. Following their decision to part with their share, an agreement for sale was signed on 29.08.2017 between Mys MONARK
DEALCOM PVT. LTD. and the assessee and his father. The deed was formalized on the developer M/s MONARK DEALCOM PVT. LTD. agreeing to pay the stakeholders a gross sum of Rs. 4,58,00,000/- out of which Rs. 2,04,50,000/- was paid simultaneously with the execution of the agreement, Rs. 1,60,12,000/- paid prior to execution and Rs.
44,38,000/- incurred by the developer towards paying compensation to the tenants.
The memo of consideration attached to the sale agreement Rs.2,04,50,000/- to the vendors confirms the payment of Considering the fact that there was no sale of property involved in the first place when the initial agreement was entered into by the vendors with developer on 25.06.2012 and also the fact that the vendors did not receive anything in cash or in kind from the developer, capital gain u/s 500 did not arise. Sale of proportionate stake to multi storied complex, the project work of which did not start in the A.Y. 2013-14, took place in the year 2017-18 which pertains to A.Y.
2018-19 Therefore capital gain arising thereof should be accounted for in the A.Y.
2018-19 and is beyond the ambit of Section 147 However the assessee when reminded of his liability of offering the capital gain to tax for A.Y. 2018-19, assured the same.”
07. Therefore, no capital gain arose in the current assessment year and hence we are not in agreement with the conclusion of the ld. CT(A).
Accordingly, we set aside the order of ld. CIT (A) and direct the AO to delete the addition.
08. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 24.02.2025. (PRADIP KUMAR CHOUBEY)
(RAJESH KUMAR)
(JUDICIAL MEMBER)
(ACCOUNTANT MEMBER)

Kolkata, Dated: 24.02.2025
Sudip Sarkar, Sr.PS
Harjinder Singh Gill; A.Y. 2013-14

Copy of the Order forwarded to :

Sr. Private Secretary/ Asst.